Friday, March 29, 2013

What happens in European banks stays in European...oh wait, nevermind

New Zealand savers could see a Cyprus-style tax on their bank accounts, the Green Party is warning, accusing the Government of planning similar solutions for the country.Canadian "bail-ins" possible should certain "systemically important banks" fail (pages 144-145, h/t www.silverdoctors.com)?

The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.

Not every precedent becomes a trend, but given how the unthinkable has become both thinkable and predictable, it doesn't hurt to be paranoid. If Canada, the "model for global banking," the financial system that was celebrated for being far less reckless than those in the US and Europe, is using bail-in language reminiscent of what was heard during that "one-off" event in Cyprus, it is definitely time to contemplate the risk of having your savings cut and pasted from your bank account.

When authorities cross a line and it doesn't trigger revolt, they keep moving until they cross the next line, and the one after that. I would be a bit suprised if we didn't see more Cyprus-like "solutions." The European Union is the world's largest economy, and is a place that seems to fancy itself the supreme repository of all things moral and just, so if such a thing can happen there (and in front of the world, no less), my guess is that other countries will at least attempt similar measures; under the guise that depositor haircuts are now part of "international law."

Those who dream of international law delivering the world from giant villians never consider that it can just as easily be used against puny non-villians. In fact, it is more likely to be used against puny non-villians because puny non-villians can't push back.

Ah well, there is probably some cosmic lesson in the fact that the originator of the word "utopia" wound up getting beheaded.